Key Market Developments in Q2-2012:Market Vista BriefingAugust 22, 2012Live Tweeting #MarketVista
Introductions                                       Katrina Menzigian                                       Vice President...
Context settingFocus of this webinar   Present key global services developments in Q2 2012 and future outlook   Provide ...
Terminology | Global In-house Center (GIC)replacing “captive”Context                                                 What ...
Highlights of today’s webinar                                                                                            A...
Presentation topics     Key market                   Special topic:     developments in Q2           Location             ...
As the fog of the 2012 U.S. election                               clears, what trend in offshoring                       ...
Outsourcing transactions have declined, while GICactivity has remained steady in last four quartersIndex of outsourcing tr...
Decline in outsourcing activity driven by BFSI,manufacturing and energy verticalsOutsourcing deals announced              ...
Outsourcing transactions have decreased intraditional geographies, growth in rest of worldOutsourcing deals announced     ...
Using banking applications outsourcing as anexample, competitive intensity is highEverest Group Performance | Experience |...
Leaders’ dominance in the banking AO increased in2011 – across contracts, ACV, and TCVMarket share of providers in large a...
High-value work reversing location set-up trendsOffshore location activity across geographies                             ...
Recent set-ups of Global In-house Centers (GICs) haveprimarily been in the technology and manufacturingverticalsDistributi...
Latin America | Key trends and developmentsacross locations                                                               ...
Presentation topics  Key market                   Special topic:  developments in Q2           Location                   ...
How is your organization              refining its location                    strategy?                   Primarily by se...
Large organizations with significant internal delivery modelsmust shift from “selection” to “optimization” approaches form...
Amongst many location optimization techniques, we highlightthree for consideration by those with large global servicesprog...
Monitoring scalability and sustainability of accessto key skillsTalent pool assessment                                    ...
Expanding scope of delivery center to morefunctionsPaths for high-performers in entry-level roles                         ...
Expanding within the same city to tap more talentDistribution of place of residence of IT offshore   Acceptable commute ti...
Highlights of key points   Existing locations can often be optimized to better utilize the resources    available in the ...
Presentation topics Key market           Special topic: developments in Q2   Location                                     ...
Key messages in today’s webinar                                                             No segments growing – all hol...
Q&ATo ask a question during the Q&A session   Click the question mark (Q&A) button located on right side of your screen. ...
Check out our blog for the latest perspectiveson global services                                                        Ex...
Related Content   Market Vista: Q2 2012   Global Location Insights: July 2012 - Offshore Locations - Plans and Perceptio...
Everest GroupLeading clients from insight to actionEverest Group locations                                                ...
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Webinar Deck: Market Developments in Q2-2012

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Current economic and political conditions clearly have had an impact on the global services market.

The number of outsourcing transactions decreased by 7 percent compared to Q1 2012, and the annualized contract value of these transactions decreased by 25 percent. In contrast, Asia is reporting significant growth in delivery centers across global in-house centers, or GICs (formerly known as captives), and service providers.

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Webinar Deck: Market Developments in Q2-2012

  1. 1. Key Market Developments in Q2-2012:Market Vista BriefingAugust 22, 2012Live Tweeting #MarketVista
  2. 2. Introductions Katrina Menzigian Vice President katrina.menzigian@everestgrp.com Eric Simonson Managing Partner – Research eric.simonson@everestgrp.com H. Karthik Vice President h.karthik@everestgrp.com Proprietary & Confidential. © 2012, Everest Global, Inc. 2
  3. 3. Context settingFocus of this webinar Present key global services developments in Q2 2012 and future outlook Provide perspectives on next generation location optimizationSources for today’s webinar  Summary from a Location Optimization 200+ page report +  Fact-based Service Provider research covering Intelligence global services Proprietary & Confidential. © 2012, Everest Global, Inc. 3
  4. 4. Terminology | Global In-house Center (GIC)replacing “captive”Context What has changed Historically, the term “captive” has  Everest Group has adopted “Global In-house referred to service delivery operations Center” or “GIC” as the preferred term to in lower cost geographies, which are replace “captive” owned and operated by the same company receiving the services (i.e.,  This will appear in all of our reports and not third-party outsourcing) content beginning in July 2012 Although the term has become widely used, it has a perceived negative tone and is not self-explanatory, causing confusion for those new to the global Growing industry-wide shift services space Both NASSCOM (India) and BPAP (Philippines) are championing the change in terminology Furthermore, many organizations, for which captive is intended to describe, do not use the term themselves Proprietary & Confidential. © 2012, Everest Global, Inc. 4
  5. 5. Highlights of today’s webinar Audience pollOutsourcing and offshoring activity  Current trends and outlookdecreased in first half of 2012  Segment performanceHigh-value work reversing location  Geographic trendsset-up trends  Offshore GIC activity  Key drivers and factors forLarge players optimizing locations assessmentin different ways than before  Examples Proprietary & Confidential. © 2012, Everest Global, Inc. 5
  6. 6. Presentation topics Key market Special topic: developments in Q2 Location Wrap up and Q&A 2012 Optimization 2.0 Outsourcing transactions GICs Service providers Locations Proprietary & Confidential. © 2012, Everest Global, Inc. 6
  7. 7. As the fog of the 2012 U.S. election clears, what trend in offshoring activity do you expect to see in the overall market? Significant decrease 0% Slight decrease 28% No change 32% Slight increase 33% Significant increase 7% Proprietary & Confidential. © 2012, Everest Global, Inc. 7Source: Live polling conducted during the “Market Vista: Global Services Developments in Q2 2012” webinar on August 22, 2012
  8. 8. Outsourcing transactions have declined, while GICactivity has remained steady in last four quartersIndex of outsourcing transactions Index of offshore GIC healthNumber Number GIC set-ups and expansions GIC divestures 33 508 516 472 433 441 411 23 20 19 18 13 0 0 1 0 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 2011 2011 2011 2011 2012 2012 2011 2011 2011 2011 2012 2012 Proprietary & Confidential. © 2012, Everest Global, Inc. 8
  9. 9. Decline in outsourcing activity driven by BFSI,manufacturing and energy verticalsOutsourcing deals announced Change in averageNumber of transactions ACV (Q1 2011-Q2 2012) 508 516 472 433 441 178 411 Others1 176 163 151 157 125 Healthcare 44 56 52 61 41 43 Public sector 114 108 75 94 102 85 Manufacturing 80 76 82 62 66 68 BFSI 94 98 100 83 74 73 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 20121 Includes energy & utilities, technology, telecom, travel & logistics, and miscellaneous Proprietary & Confidential. © 2012, Everest Global, Inc. 9
  10. 10. Outsourcing transactions have decreased intraditional geographies, growth in rest of worldOutsourcing deals announced Change in averageNumber of transactions ACV (Q1 2011-Q2 2012) 508 516 472Rest of World2 96 433 441 119 411 105 66 65Rest of Europe 90 112 129 127 104 137 107 UK 102 103 91 80 88 82North America1 198 165 160 173 150 132 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 20121 Excludes Mexico2 Includes Asia-Pacific, Latin America, and Africa Proprietary & Confidential. © 2012, Everest Global, Inc. 10
  11. 11. Using banking applications outsourcing as anexample, competitive intensity is highEverest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix for large banking AO relationships Leaders 75th percentile High Major Contenders Leaders TCS Emerging Players Cognizant IBM GS Star Performers 75th percentile Major Contenders Accenture Wipro Infosys (Transaction activity) HCL Technologies Market success bolstered its Major HPES TCS strengthened Contender positioning its Leadership HCL Capgemini position MphasiS Polaris iGate CGI Polaris enhanced its 25th percentile Dell Services CSC major contender position by expanding scale and Mahindra Satyam L&T Infotech achieving higher market Syntel EPAM Mindtree success Softtek Luxoft 2011 saw L&T Infotech Hexaware Unisys crossing over from ITC Infotech Emerging Players to Major Contenders category Emerging Players Low Low 25th percentile High Delivery capability (Scale, scope, domain investments, and delivery footprint)The banking AO market, represented by 25 service providers, assessed by the Everest Group, scaled up to over US$6.4 billionin revenue and ~130,000 FTEs spread across ~22 delivery countries Proprietary & Confidential. © 2012, Everest Global, Inc. 11
  12. 12. Leaders’ dominance in the banking AO increased in2011 – across contracts, ACV, and TCVMarket share of providers in large active banking AO contracts1 Increase from last yearActive ACV and total TCV in US$ billion, number of contracts No/minimal change from last year Decrease from last year100% = ~6.4 0.9 ~21.4 1.4 180+ 5Emerging Players 3% 1% 4% 1% 1% 10%Major Contenders 23% 5% 28% 28% Major contenders category lost 6% 4% 4-6% share of their revenues, TCV, and number of contracts in the banking AO industry Leaders 74% 68% Leaders expanded their market 62% share by 3-5% in terms of number of transactions, total TCV, as well as active ACV (revenue) 4% 5% 3% Active ACV Total TCV Number of contracts The large players are getting larger – and with larger deals 1 Contracts for a representative set of 25 providers; contract TCV >US$25 million and status active as of December 2011 Proprietary & Confidential. © 2012, Everest Global, Inc. 12
  13. 13. High-value work reversing location set-up trendsOffshore location activity across geographies Offshore location activity across Tier-1 andNumber of service delivery centers set up Tier-2 cities Number of service delivery centers set up H1 2011 H2 2011 H1 2012 50 44 43 37 38 38 35 39 33 22 22 13 14 12 10 Asia Europe and Africa Latin America Tier-1 Tier-2Key reversals in set-up trends (compared to 2009 and 2010) Asia gaining share compared to Europe and Africa More set-ups in Tier-1 cities compared to Tier-2 cities Proprietary & Confidential. © 2012, Everest Global, Inc. 13
  14. 14. Recent set-ups of Global In-house Centers (GICs) haveprimarily been in the technology and manufacturingverticalsDistribution of new GIC set-ups by industry verticals1Number 46 43 Others1 10 6 37 Telecom 2 6 5 4Manufacturing 14 13 9 Technology 20 18 19 Recent activity concentrated in India and other countries in Asia H1 2011 H2 2011 H1 20121 Includes financial services, healthcare, and other miscellaneous industry verticals Proprietary & Confidential. © 2012, Everest Global, Inc. 14
  15. 15. Latin America | Key trends and developmentsacross locations NOT EXHAUSTIVE Proprietary & Confidential. © 2012, Everest Global, Inc. 15
  16. 16. Presentation topics Key market Special topic: developments in Q2 Location Wrap up and Q&A 2012 Optimization 2.0  Context  Examples Proprietary & Confidential. © 2012, Everest Global, Inc. 16
  17. 17. How is your organization refining its location strategy? Primarily by seeking to use new locations 6% Primarily by optimizing existing locations 29% Mix of optimizing existing locations and using new 64% locations Proprietary & Confidential. © 2012, Everest Global, Inc. 17Source: Live polling conducted during the “Market Vista: Global Services Developments in Q2 2012” webinar on August 22, 2012
  18. 18. Large organizations with significant internal delivery modelsmust shift from “selection” to “optimization” approaches formanaging locationsPressures facing large organizations “Selecting” locationswith significant internal delivery models  New region/country/city  New skills, especially languages  Filling gaps Limited appetite Fragmented/sub-  Diversifying structural risks for investment scale processes “Optimizing” locations Business Increased need  Finding synergy across sites – demanding more for high-value management, employee value proposition, value skills delivery models, etc.  Leveraging existing human capital to expand services and careers Maturing Competition in  Managing and balancing capacity across workforce labor market options (internal and third-party)  Operationally mitigating risk  Highly selective about adding new locations – and only when complementing other locations Proprietary & Confidential. © 2012, Everest Global, Inc. 18
  19. 19. Amongst many location optimization techniques, we highlightthree for consideration by those with large global servicesprograms  Current scale of skill in marketMeasure and monitor  Rate at which new skills are entering (all sources)sustainability of  Size and pace of competition vying for the skillsaccess to key skills  Multi-function center enriches talent modelExpand within an  Creation of career paths across functionsexisting center  Access to more of the labor pool in the city  Leverage pre-existing investments (management,Expand within a city people engine, etc.) Proprietary & Confidential. © 2012, Everest Global, Inc. 19
  20. 20. Monitoring scalability and sustainability of accessto key skillsTalent pool assessment How to look at  Assess both gross and net supply  Contemplate impact of in-bound and out-bound migration  Separately assess for experienced hires Annual Other Total Lack of Lack of Gross Demand Net relevant relevant annual propen- employ- annual from available Potential implications graduate pool pool sity for ability for supply comp- supply pool the the etition  Target size for skill function function  Recruiting modelsRunway multiple analysis1 Highly constrained Emerging constraints Comfortable threshold  Training programs Runway multiple 1  Collaboration in the local market City 1 City 2 City 3 City 4 ’12 ’13 ’14 ’12 ’13 ’14 ’12 ’13 ’14 ’12 ’13 ’14 Entry-level Experienced1 Ratio of net supply to hiring requirement Proprietary & Confidential. © 2012, Everest Global, Inc. 20
  21. 21. Expanding scope of delivery center to morefunctionsPaths for high-performers in entry-level roles Feeder roles How to look at Target roles  Calculate amount of “surplus” talent produced from key roles 10% of top 10% of top performers Testing performers  Proactively use to “shape the pyramid” Technical Analytics Transaction  Consider implications across helpdesk processing delivery locations 5% of top performers 5% of top Development performers Potential implicationsRe-balancing feeder and target roles  Bridge training for new roles  Cross-pollination Current empl.: XX 2013 empl.: XX  Mix of functions in a center Center 2 Current empl.: XX  Target scope/size of GIC and 2013 empl.: XX third party roles Center 1 Inter-center transfer of feeder roles to rebalance demand and supply Proprietary & Confidential. © 2012, Everest Global, Inc. 21
  22. 22. Expanding within the same city to tap more talentDistribution of place of residence of IT offshore Acceptable commute time by current commute time IT workforce’s relative ranking of factors while consideringworkforce by seniority (years of experience) 2011; Percentage career opportunities within their current organization2011; Number of FTEs 2011; Percentage Rank1-2 Rank 3-5 Rank 6-7 Acceptable commute time (min)100% = XX XX 30 60 90 >90 Company brand Current average commute time (min) Region 1 0-30 Profile, career progression and growth opportunity 30-60 Region 2 Commute time to place of work 60-90 Region 3 Relocation Region 4 90+ Social ecosystem Region 5 near place of work Region 6 Total Cost of living near place of workSeniority 2-4 years 5-7 yearsHow to look at Understand distribution of talent within the city Focus analysis on employee value proposition and commute/transit sensitivitiesPotential implications Center size and work allocation Recruiting strategy Proprietary & Confidential. © 2012, Everest Global, Inc. 22
  23. 23. Highlights of key points Existing locations can often be optimized to better utilize the resources available in the market – Monitor key skills – Expand existing center – Expand in same city To do so requires deeper assessment of the location’s talent dynamics and adjustments to operating models – Talent migration – Recruiting – Training Proprietary & Confidential. © 2012, Everest Global, Inc. 23
  24. 24. Presentation topics Key market Special topic: developments in Q2 Location Wrap up and Q&A 2012 Optimization 2.0  Submit any remaining questions! Proprietary & Confidential. © 2012, Everest Global, Inc. 24
  25. 25. Key messages in today’s webinar  No segments growing – all holdingOutsourcing and offshoring activity steady or decliningdecreased in first half of 2012  Competitive intensity is high  Renewed focus on Asia and tier-1High-value work reversing location citiesset-up trends  GIC activity holding steady  More focus on “optimizing” thanLarge players optimizing locations “selecting”in different ways than before  Sustainability and talent optimization are key Proprietary & Confidential. © 2012, Everest Global, Inc. 25
  26. 26. Q&ATo ask a question during the Q&A session Click the question mark (Q&A) button located on right side of your screen. This opens Q&A Be sure to keep the default set to “send to All Panelists” Type your question in the box at the bottom of the Q&A box and click the send button Attendees will receive an email with instructions for downloading today’s presentation For advice or research on Market Vista, please contact: – Katrina Menzigian, katrina.menzigian@everestgrp.com – Eric Simonson, eric.simonson@everestgrp.com – H. Karthik, h.karthik@everestgrp.comStay connectedWebsites Twitter Blogswww.everestgrp.com @EverestGroup www.sherpasinblueshirts.comresearch.everestgrp.com @Everest_Cloud www.gainingaltitudeinthecloud.com Proprietary & Confidential. © 2012, Everest Global, Inc. 26
  27. 27. Check out our blog for the latest perspectiveson global services Experts in the global services terrain www.sherpasinblueshirts.com Proprietary & Confidential. © 2012, Everest Global, Inc. 27
  28. 28. Related Content Market Vista: Q2 2012 Global Location Insights: July 2012 - Offshore Locations - Plans and Perceptions of Buyers and Service Providers (2012-14) Global Sourcing Viewpoint: "De-mythifying" Location Selection - Realities Behind 5 Common Myths of Location Selection Global Sourcing Viewpoint: Achieving Next Generation Excellence in the Captive (GIC) Model Blog: General Motors’ Drive to Insource most of its Outsourced IT Scope by 2015: Prospects of an “against the tide” success story? A recipe for disaster? A populist political play? Blog: What the Supreme Court Ruling Means for Global Sourcing in Healthcare Proprietary & Confidential. © 2012, Everest Global, Inc. 28
  29. 29. Everest GroupLeading clients from insight to actionEverest Group locations Dallas (Headquarters): info@everestgrp.com +1-214-451-3000 New York: info@everestgrp.com +1-646-805-4000 Toronto: canada@everestgrp.com +1-416-865-2033 London: unitedkingdom@everestgrp.com +44-207-887-1483 Delhi: india@everestgrp.com +91-124-496-1000 www.everestgrp.com | research.everestgrp.com | www.sherpasinblueshirts.com Proprietary & Confidential. © 2012, Everest Global, Inc. 29

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